The Trump Administration and Student Loan Debt

You’ve graduated from college, found a job and are comfortable with your income. However, there’s still one weight on your shoulders – student loan debt. Even with your steady income stream, you have financial obligations that may include hefty student loan payments, which can take a big chunk out of your paycheck.

Paying the minimum on your monthly student loan bill will only mean that you owe more on your student loan debt in the long run, thanks to accruing interest. Student loan refinancing could be the answer that helps you to secure a lower interest rate.

Postponing your decision to refinance might not be the best solution for you. If you’re waiting for the Trump administration to develop new policies to determine your course of action, you could suffer unintended consequences as a result.

Since Donald Trump took office as President, many college graduates have wondered how the administration will handle student debt. As of yet, there have been no executive orders regarding student loan debt, and Trump’s policies on student loans have been vague, at best.

The current administration seems to have many other priorities at the moment. For now, let’s examine Trump’s views on the subject, their potential downfalls and how students can regain control of their own financial future.

The Trump Repayment Plan

• During his campaign, Trump floated the idea of an income-based repayment plan that would allow borrowers to have student loans forgiven sooner by committing to higher monthly payments. Proposed details of the plan include paying 12.5% of income (instead of the 10% under the current plan) and having remaining debt forgiven after 15 years (as opposed to a 25-year maximum under the existing program, although borrowers could enjoy forgiveness in as little as 10 with qualifying public service jobs). There is potential here to help borrowers with low income and those with high debt, but if your debts are manageable and you enjoy a decent income, you’ll likely pay off student loans before benefits kick in.

• Increase student loan forgiveness amounts. The plan would lower federal spending, and therefore shorten repayment terms. Also, it wouldn’t apply if you had a private student loan payment every month. You can’t receive forgiveness on such a loan, plus you’d have to spend 10 consecutive years working for a nonprofit organization, which in today’s job market is hard to achieve.

• Get rid of the Public Service Loan Forgiveness program. To date, over half a million students have signed up to participate in a loan forgiveness program that will eliminate remaining student debt after 10 years of faithful payment, supposing you work in a qualifying public service job. Unfortunately, this program is not only fraught with restrictions and limitation, but a legal filing by the Department of Education in March alleges that borrowers who thought they were eligible and were working toward forgiveness may, in fact, not qualify at all. Will students enrolled in this program be better or worse off under a new plan? Do you want to wait to find out?

Why Choose Student Loan Refinancing?

Lowering your payments today and/or reducing the term on your student loans may be a better way to go if you are looking to pay your debt off sooner rather than later and want to realize interest savings today. The advantages of going the route of refinancing are explained below:

• Lower the interest rate(s) on your loan(s). You keep more cash in the bank while the loan is being repaid. Saving on student loan repayment is even more feasible if interest rates have dropped since you borrowed from the lender, and your credit score is higher than it was then.

• Option to lock in today’s low rates. If you have high fixed rates on your loans or you have variable rate loans which could see interest costs increase if rates go up, you stand to save more by taking out a fixed rate loan today and locking in low rates.

• Lower payments every month. Typically, student loans have terms of 10 years. Extending the term can reduce what you pay each month, which can be good if you need to allocate funds to other expenses.

• Breathing room for earnings increases. If you receive an increase in salary, you can always pay more toward the loan every month. This may potentially decrease your repayment term and save on accrued interest as well.

Don’t Wait for Trump’s Policies on Student Loans 

President Trump has not announced any time frame for policy changes, nor has he taken a strong stance on student loan debt to date. When he finally does come up with solid policies, you may have been able to save hundreds if not thousands on your student loan by simply refinancing. You should also focus on keeping the relationship with your lender on good terms. That means staying current with every student loan payment; you’ll have more options going forward, and your credit will be in good standing.

There are other ways to reduce your payment terms. These include paying more than the minimum amount; many people just pay what they need to each month, but this only means paying more in interest later. One option is to set up automatic payments, so you don’t have to decide every month, which often results in paying a lower amount.

More Ways to Handle Student Loan Debt

The Trump administration appears to be leaving the issue of student loan debt on the back burner. That doesn’t mean you should sit around and wait for help. You can do various things to manage your debt, such as applying funds from your annual raises. Putting half of a salary increase into paying student loans is an effective strategy.

Effectively managing your budget is another option. You can free more funds to pay off debt by living where the rent is cheaper, eating in and cutting unnecessary spending. Working extra hours at a side job can yield more income to devote to student loan repayment, as well. You could also take a student loan interest deduction when you file your federal tax returns. Up to $2,500 in taxes can presently be deducted from federal income taxes, subject to certain income limitations.

There are effective ways to deal with your debt now, regardless of whether Trump’s policies on student loans might help you in the future. Lowering your interest rate now on your student loan debt can deliver significant rewards.